Guest Blog - Enertopia (ENRT)

I want to welcome Matt Finston, who is sharing his views on Enertopia (ENRT). I encourage anyone who has information to share that the community will value to do so. Please remember, though, that 420 Investor's publishing a guest blog doesn't mean that we endorse the conclusions.

There
Will Be Weed

There is no question that this is an exciting time for
investors, marijuana enthusiasts, and legal reformists. Major steps towards
North American legalization of Marijuana has unleashed the proverbial ‘Green
Rush.’ Spectators and prospectors have come out of the woodwork to capitalize
on this trend.

Many companies in the US have benefited from this rush. The
three largest American players, Cannavest Corp (CANV), Advanced Cannabis
Solutions (CANN), and Medbox Inc (MDBX), have a combined market cap of more than $5 billion. That amount is not based on
net income but on investor enthusiasm. In fact, these companies are still
operating at a loss. Still, that is to be expected from companies still in
development stages.

These dollars have definitely turned heads. The rush is on.
And everyone wants a piece.

Location,
Location, Location

But
one sector of this burgeoning industry that has not had its fair share of the
limelight is Canada.
Medical Marijuana has been legal to grow and consume since 2001 under
the Medical Marihuana Access Regulations (MMAR). The MMAR created special
provisions to allow individuals who demonstrated medicinal needs the ability to
obtain marijuana under the Medical Marihauna Access Program (MMAP). Individuals
with a MMAR license would be able to obtain dried marijuana from Health Canada, a
designated individual grower, or from their own grown supply.

In
2012, concerns regarding public health and inefficiency led the Canadian
government to end its MMAP program and repeal MMAR, replacing it with the
Medical Marihuana Purposes Regulations (MMPR). By April 1st, 2014,
it will no longer be legal to grow and sell marijuana with a MMAR license.
Producers will need to procure a MMPR license in order to grow, ship, sell,
ship, or destroy marijuana.

Canada Matters

The
change in Canada’s
regulation of marijuana is about one thing: commercializing pot. Under MMPR, a
corporation has the right to grow and sell marijuana. This is a watershed for
private interests. MMPR has essentially paved the way for businesses to profit
off of pot.

The
department of Canadian health conservatively estimates that there will be
57,799 patients receiving medicinal marijuana in 2014. This figure is projected
to have a 40% annualized growth rate with 438,000 patients receiving medicinal
marijuana by 2024. Under MMPR, sales from marijuana are expected to grow $1.3
billion annually.

In
my opinion, these estimates are highly conservative. The MMPR law also enables
small businesses the ability to export marijuana.
As the world progressively embraces deregulation, Canadian companies will be
ahead of the curve, ready to supply the world with dried marijuana.

Here
Come the Prospectors

The
prospect for profiting off of marijuana proves promising. Small businesses in Canada have
already stepped up to provide a new generation with medically grade marijuana.
One Canadian company, Enertopia Corp. (ENRT), plans on obtaining a MMPR license
through a joint
venture agreement with Green Canvas ltd. Like many of the companies in
this sector, limited coverage and legitimation has left investors speculating
as to which pot-stock will be able to capitalize off marijuana.

CEO of Robert McAlister believes Enertopia will be more successful prospecting weed rather than oil and gas. There are reasons to think he might be right. The joint venture with Green Canvas ltd. is a smart move. Tim Selenski, head of Green Canvas, was one 77 licensed growers in Canada under the MMAP program. Based in Regina, Saskatchewan with a population of 134,000, Mr. Selenski has had thirteen years of experience providing medical marijuana for his community. His knowledge and experience of the Canadian market will give Enertopia the edge to fast track their joint venture.

Enertopia has also secured a 60,000 sq. ft. production space where it can grow medical grade marijuana. Of course, this joint venture with Green Canvas is conditioned upon Mr. Selenski obtaining a MMPR license for Green Canvas.

As the adage goes, location is everything. Even though the picture isn’t perfect, Enertopia might be positioned to profit from Canada’s privatization of pot.

And Along Came Prospectors

On
March 5, 2014, Lexaria (LXRP) announced that it too was abandoning its going
concern to capitalize off the marijuana industry by signing a
joint venture agreement with Enertopia. Lexaria also used to be in the
oil business. Up until March 5, Lexaria’s had a marginally profitable producing
well in Amite and Wilkinson Counties, Mississippi. Based on the joint-venture
agreement it is unclear whether gas and oil will continue to be a going concern
of Lexaria’s.

There
are concerns with the number of publically traded companies that have changed
direction this year to get in on this ‘Green Rush.’ Investors might feel more at ease knowing that Lexaria and Enertopia have had a partnership since 2010. Chris Bunka, CEO of Lexaria, has held a major stake in Enertopia. Furthermore, the companies share the same CFO, Ms. Bal Bhullar.

As part of the
joint venture, Lexaria is giving Mr.McAllister 500,000 restricted shares and
500,000 stock options. In addition, Enertopia is also receiving 1,000,000
restricted shares of Lexaria.

Will There
Be Weed?

With green
gold expected to spurt out of the ground, investors have rushed in to profit.
My concern is that instead of building sustainable business to capitalize on
this industry, businesses are looking to hit it big on this investor
enthusiasm.

As oilmen,
Mr. Bunka and Mr. McAllister know that many prospects don’t produce. You may
think you have found a profitable tract of land, but after you start drilling,
you find that it’s dry. In the same way, Green Canvas might be able to produce.
But if doesn’t, it’ll be written off as just another loss. But in the meantime,
Mr. Bunka and Mr. McAllister will profit plenty from eager investors through
joint incentivizing stock options.

Mr.
McAllister and Mr. Bunka did not fare too well as oilmen. Although Lexaria did
a bit better than Enertopia, this sudden change in direction suggests a lack of
confidence in the companies’ ability to actualize profits in their original
industry. Why should we expect them to do well in marijuana?

At this
point, I’d caution investors from overestimating the potential of this company.
The prospect of Enertopia successfully capitalizing on this industry depends on
Green Canvas obtaining the MMPR license. Without it, Enertopia will be
left with just another failed prospect.

That being
said, I believe investors are still undervaluing the Canadian market. When MMPR
takes effect, investors should expect to see a lot of upward momentum for
Canadian pot-stocks. Perhaps Enertopia will profit too. It is too early to tell.